Chinese Economics Thread

[crobato]

Oh, so 17% of national output is nothing. We get it. And if you care to know any more about the subject, a couple hundred billions more of capital injections and loan purchases TARP style were implemented up til 2002, and even then some of the old NPLs are still there. We get it. Bow to the chairman.

Yup its nothing since the losses turned out to be absorbed by China's enormous reserves and savings rate. In effect, bad loans are just properties that are nationalized and confiscated, and then as it turns out later, resold at a profit when times are good. (US government made a killing later on the Lincoln Memorial assets for the same reason.)

Consider that Japan has a bad debt obligation greater than the size of its GDP. As long as it can nationally cover that debt...which it did because it has enormous reserves in its own institutions. But you can't say that with the US institutions.

 

[FugitiveVisions]

I can't believe you are actually trying to taint Jim Rogers name by bringing him to your side of the argument in support of big government. Jim Rogers out of all people understands the problem of nationalization full well. Once you whip off private shareholders and the government starts to make policy loans, it's all over. But you bring either your perverse logic or lack of understand and turn this 180 degrees. Jim Rogers doesn't want your government bureaucrats running Britain. Jim Rogers thinks that your government bureaucrats will run Britain into the ground.

 

[Hendrik_2000]

Having bad debt isn't the problem if you got the reserves and deposits to cover it. High savings rate, high FDI and plenty of foreign reserves. China has all three by the spades over anything in the world.

It is the accountability of bad debt that is the problem in many Western institutions. Many of these "complex" and "exotic" financial instruments thought of by many investment banks are literally repackaging bad debt as "good", and one of the ways that is done is to mix in good or performing assets to hide the smell. Kind of like packaging crap with good food, the smell of the food covers up the smell of the crap. In the end, you can't tell what is good or bad, and when what used to be good, also becomes crap from the decaying economic conditions. So yeah, we don't know yet to the full extent how truly bad the extent of bad debts are, and certainly we're running out of liquidity to cover them up. In the end, like in the UK, which Jim Rodgers have just declared to be "finished", the bad has to be nationalized. That does not solve the problem either, because in effect, the still productive has to be penalized for the failed banks.

Right on Crobato On top of that knowing that they had stinky asset on hand they buy insurance from the August institution like AIG and other in form of CDO Those issuer sell the insurance without backing it up with asset In effect no different than race horse betting Incredulously the Senate and Congress approved the inouccous bill late in the Christmas time because everybody don't understand or could't care less because recess is on hand

So when the call come everything just crumble like house card!

 

[RedMercury]

FV, the brand of economic thinking you have been indoctrinated with has been proven flawed, not finished, not unworkable, but not perfect either. Get a grip and face reality, and stop grasping at straws.

 

[crobato]

I can't believe you are actually trying to taint Jim Rogers name by bringing him to your side of the argument in support of big government. Jim Rogers out of all people understands the problem of nationalization full well. Once you whip off private shareholders and the government starts to make policy loans, it's all over. But you bring either your perverse logic or lack of understand and turn this 180 degrees. Jim Rogers doesn't want your government bureaucrats running Britain. Jim Rogers thinks that your government bureaucrats will run Britain into the ground.

Yet the same Mr. Rogers is so bullish about China he has even written a book about it.

A Bull in China: Investing Profitably in the World's Greatest Market - December 4, 2007 (ISBN 1400066166)

The only logic that is perverse is yours, since its all in Mr. Roger's view. Why don't you ask Mr. Rogers why nationalization in China works and why not in the UK? Oh and recently he came forward in Bloomberg TV telling people why China is going to get ahead in these times.

 

[crobato]

Right on Crobato On top of that knowing that they had stinky asset on hand they buy insurance from the August institution like AIG and other in form of CDO Those issuer sell the insurance without backing it up with asset In effect no different than race horse betting Incredulously the Senate and Congress approved the inouccous bill late in the Christmas time because everybody don't understand or could't care less because recess is on hand

So when the call come everything just crumble like house card!

The problem of these exotic instruments is that you don't know what the hell they are whereas loans in China are pretty straightforward and simple. If there is a loan, there is collateral, land, building or asset. If loan becomes bad, you simply collect or confiscate that asset, and resell them again later.

But with those instruments, all you collect is some fancy piece of paper.

 

[bladerunner]

I notice an increasing amount of comments by readers in various financial articles, that pumping money into those crippled banks such as Citi Barclays and others, is a waste of money as it hasn't done anything beneficial to the man in the street or business, credit wise. Therefore they should let them fall, and start again.The notion that "to big to let go" is a fallacy.
Is that just being nieve, because letting them go would be like letting off financial nuclear bombs

 

[crobato]

I notice an increasing amount of comments by readers in various financial articles, that pumping money into those crippled banks such as Citi Barclays and others, is a waste of money as it hasn't done anything beneficial to the man in the street or business, credit wise. Therefore they should let them fall, and start again.The notion that "to big to let go" is a fallacy.
Is that just being nieve, because letting them go would be like letting off financial nuclear bombs

Yes, go ahead and let them go. It will wipe out the savings of the depositors.

Guess what will happen. You will have banks runs here and there as everyone panics and pulls out their money from the banks. The banks do not have the money to pay all depositors back: remember Fractional Banking?

That will be the ultimate collapse.

 

[pla101prc]

China used to have a problem with bad loans. that's the source of all the claims about how China is gonna collapse within N years (written N years ago). but i remember before Hu Jintao came along the Chinese did something to the banks that suddenly turned bad loans into good national assets...it was more of an administrative move rather than economic, i forgot how they did it but the Chinese government seems to be pretty fluent with this stuff.

to bladerunner, yeah you cant just let go of the banks. but to go along with the money being thrown at them you also need some sort of restructuring, but right now we are only seeing money being handed out and no honest effort to actually change things for the better. its hard but its gotta be done

 

[bladerunner]

Well it looks like the first shots of the Obama administration has been fired when Geithner has made it quite plain about dealing with issues on Chinas currency.
The Democrats with supporting economists and business studies experts such as Peter Morici have been gunning for China a long time. With no lack of support in Congress and the Senate, things could get very tricky for the Chinese, as I think it would be more than just mild cajoling as practised by the Bush administration.
Any view on a likely scenario?